
[Federal Register: March 17, 2008 (Volume 73, Number 52)]
[Notices]               
[Page 14282-14284]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17mr08-105]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57449; File No. SR-Amex-2008-13]

 
Self-Regulatory Organizations; American Stock Exchange, LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Rules Pertaining to the Terms of Index Option Contracts

March 7, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on February 19, 2008, American Stock Exchange, LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared substantially by Amex. Amex 
filed the proposed rule change as a ``non-controversial'' proposed rule 
change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(6) thereunder,\4\ which renders it effective upon filing with the 
Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Amex proposes to add new Commentary .05 to Rule 903C to allow the 
listing of up to seven expiration months for options on certain broad-
based indexes.
    The text of the proposed rule change is available at http://
www.amex.com, the principal office of Amex, and the Commission's Public 
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, Amex included statements 
concerning the purpose of and basis for the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. Amex has prepared summaries, set forth in Sections A, B, 
and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to add new Commentary .05 to Amex Rule 903C 
(Series of Stock Index Options) to allow the Exchange to list up to 
seven (7) expiration months for index options based on broad-based 
securities indexes (including reduced-value and jumbo) upon which a 
constant three-month volatility index is calculated. Currently, 
subparagraphs (i) and (ii) to Rule 903C(a) permit the Exchange to list 
only six (6) expiration months in any stock index option at any one 
time.
    Volatility products offer investors a unique set of tools for 
hedging. For example, the Chicago Board Options Exchange, Incorporated 
(``CBOE'') Volatility Index (``VIX'') options, first introduced in 
February 2006, have proven to be one of CBOE's most successful new 
products ever listed, currently averaging over 90,000 contracts traded 
per day. In a recent proposal, CBOE explained that it plans to 
introduce new volatility products and new volatility indexes in the 
near future, including the CBOE S&P 500 Three-Month Volatility Index 
(``VXV'').\5\ Similar to the VIX, the VXV is a measure of S&P 500 
implied volatility, the volatility implied by S&P option prices. 
Instead of reflecting a constant one-month implied volatility period, 
however, VXV is designed to reflect the implied volatility of an option 
with a constant three months to expiration. Since there is only one day 
on which an option has exactly three months to expiration, VXV is 
calculated as a weighted average of options expiring immediately before 
and immediately after the three-month standard. Accordingly, an index 
calculator would need to use four consecutive expiration months in 
order to calculate a constant three-month volatility index.\6\
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    \5\ CBOE calculates volatility indexes on other broad-based 
security indexes, such as the Dow Jones Industrial Average index 
(``DJX''), the Nasdaq-100 index (``NDX''), and the Russell 2000 
index (``RUT''). CBOE may calculate a constant three-month 
volatility index on DJX, NDX, or RUT in the future. See Securities 
Exchange Act Release No. 56821 (November 20, 2007), 72 FR 66210 
(November 27, 2007) (SR-CBOE-2007-82) (``CBOE Proposal'').
    \6\ See Id. In CBOE Proposal, CBOE provides examples 
illustrating the need for a seventh month in order to maintain four 
consecutive near term contract months.
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    Under the current application of subparagraphs (i) and (ii) of Amex 
Rule 903C(a), the Exchange generally lists three consecutive near term 
months and three months on a quarterly expiration cycle. One of the 
three consecutive near term months is always a quarterly month; 
however, that near term contract month (which is also a quarterly 
month) is not included as part of the three months listed on a 
quarterly expiration cycle. Therefore, in order to permit the addition 
of four consecutive near term months under Rule 903C(a), the Exchange 
would only be able to list two months on a quarterly expiration cycle. 
Because of customer demand and other investment strategy reasons for 
having three months on a quarterly expiration cycle, the Exchange is 
seeking to increase, from six to seven, the number of expiration months 
for broad-based security index options upon which a constant three-
month volatility index is calculated.
    Proposed Commentary .05 to Rule 903C will permit the Exchange to 
list up to seven expiration months at any one time for any broad-based 
security index option contract \7\ upon which any exchange calculates a 
constant three-month volatility index. As a result, the Exchange, eight 
times a year, would be able to add an additional seventh expiration 
month in order to

[[Page 14283]]

maintain four consecutive near term contract months.
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    \7\ See Amex Rule 900C(b)(1). Examples of such broad-based 
securities indexes include the S&P 500, DJX, NDX and RUT.
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    The Exchange believes that this proposal is necessary for 
competitive reasons based on the fact that the CBOE, International 
Securities Exchange, LLC, and NYSE Arca, Inc. all have the ability to 
list up to seven expiration months for broad-based securities indexes 
on which a constant three-month volatility index is calculated.\8\ This 
proposal will similarly permit the Amex to accommodate the listing of a 
fourth consecutive near term expiration month and maintain the listing 
of three months on a quarterly expiration cycle, by increasing, from 
six to seven, the number of expiration months for broad-based 
securities indexes on which a constant three-month volatility index is 
calculated.
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    \8\ See Securities Exchange Act Release Nos. 56821 (November 20, 
2007), 72 FR 66210 (November 27, 2007) (SR-CBOE-2007-82); 57104 
(January 4, 2008), 73 FR 2070 (January 11, 2008) (SR-ISE-2007-113); 
57284 (February 7, 2008), 73 FR 8387 (February 13, 2008) (SR-
NYSEArca-2008-16).
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    The Amex has analyzed its capacity and represents that it believes 
the Exchange and the Options Price Reporting Authority (OPRA) have the 
necessary systems capacity to handle any additional quote and message 
traffic associated with the additional listing of a seventh contract 
month in order to maintain four consecutive near term contract months 
for those broad-based securities index options upon which a constant 
three-month volatility index is calculated.
2. Statutory Basis
    The Exchange believes the rule proposal is consistent with Section 
6 of the Act,\9\ in general, and with Sections (b)(5) of the Act,\10\ 
in particular, because the proposed increase in the number of options 
contract expiration month series is limited to broad-based securities 
indexes upon which a constant three-month volatility index is 
calculated and because the additional quote and message traffic from 
any additional index option series is not expected to significantly 
impact current system capacity. In addition, the Exchange believes 
proposed rule change is consistent with the provisions of Section 6 of 
the Act,\11\ in general, and with (b)(5) of the Act,\12\ in particular, 
in that the proposal is designed to prevent fraudulent and manipulative 
acts and practices, to promote just and equitable principles of trade, 
to foster cooperation and coordination with persons engaged in 
regulating, clearing, settling, processing information with respect to, 
and facilitating transactions in securities, to remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system, and, in general, to protect investors and the public 
interest.
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    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ 15 U.S.C. 78f.
    \12\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Amex does not believe that the proposed rule change will impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \13\ and Rule 19b-
4(f)(6) thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under 19b-4(f)(6) may not become 
operative prior to 30 days after the date of filing, unless the 
Commission designates a shorter time if such action is consistent with 
the protection of investors and the public interest.\15\ The Exchange 
has requested that the Commission waive the 30-day operative delay. The 
Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
The Commission notes that other self-regulatory organizations recently 
adopted substantially similar rule changes that were effective upon 
filing,\16\ and that this filing raises no new regulatory issues.
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    \15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
Amex has complied with this requirement.
    \16\ See Securities Exchange Act Release Nos. 57284 (February 7, 
2008), 73 FR 8387 (February 13, 2008) (SR-NYSEArca-2008-16) and 
57104 (January 4, 2008), 73 FR 2070 (January 11, 2008) (SR-ISE-2007-
113).
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    The Commission notes the Exchange's representations that it 
possesses the necessary systems capacity to handle the additional 
traffic associated with the additional listing of a seventh contract 
month in order to maintain four consecutive near term contract months 
for those broad-based security index options upon which the Exchange 
calculates a constant three-month volatility index. The Commission 
hereby grants the Exchange's request and designates the proposal as 
operative upon filing.\17\
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    \17\ For purposes only of waiving the 30-day operative delay of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File No. SR-Amex-2008-13 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-Amex-2008-13. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/
sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the

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proposed rule change between the Commission and any person, other than 
those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for inspection and 
copying in the Commission's Public Reference Room, on official business 
days between the hours of 10 a.m. and 3 p.m. Copies of such filing also 
will be available for inspection and copying at the principal office of 
Amex. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
Amex-2008-13 and should be submitted on or before April 7, 2008.
    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).

Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-5240 Filed 3-14-08; 8:45 am]

BILLING CODE 8011-01-P
